Friday, June 18–Berlin Council Rejects Revolving Business Loans

BERLIN – Businesses in
Berlin will have to carry on without town government business improvement loans
after three of five council members rejected the proposal.

Economic Development
Director Michael Day proposed the revolving loan fund to the town council
recently as a means of supporting existing businesses with operational costs,
such as new equipment or building improvements.

“I think it’s something
the town should have. A lot of towns have them,” said Day.

Day said he realized
during the façade renovation program, which offers reimbursement to building
owners for building façade improvements after the work is completed, that many
businesses need a loan upfront to get the work done before receiving payment
from the grant.

The loan program
proposed by Day, ultimately not approved, would have set aside $250,000 from
the town’s general fund for loans, with business owners required to apply for
the money just like any other loan. Borrowers could have borrowed up to
$25,000, with a 10-year loan period. Rates would have been set at prime plus
one.

During the discussion
prior to the vote, Williams said that business owners with excellent credit are
having difficulty getting loans because of the current economic climate. Using
a small portion of the town’s $8 million in reserves to make reasonable loans
to enhance town businesses makes sense, according to Williams.

“It’s something I’ve
been looking forward to, not a handout but a helping hand,” Henry said.

However, at least one
citizen spoke out against the proposal.

“I do support business
in the town of Berlin,” said citizen Jim Hoppa. “I do not feel that the town
should be getting into the banking business.”

“This is nothing new for
a town to do. This is actually old,” Day said, adding Salisbury, Fruitland and
the Tri-County Council offer similar loan programs.

“I can see the big picture and yes a lot of
smaller towns do this,” said Councilwoman Lisa Hall.

However, Hall said, she
thought long and hard about the proposed loan fund and decided she could not
support it.

What if a business goes
bankrupt, leaving the loan unpaid, Hall asked.

“It costs money to chase
money,” said Hall.

Hall also said she is
uncomfortable with the $25,000 loan maximum. “I think that’s a lot of money to
loan out to a business,” Hall said.

Hall also wondered how
it benefits Berlin if a town loan enables a business to be so successful that
it moves to a location outside of town limits. Is there an obligation for a
business receiving a town loan to stay put, Hall wondered.

The Mayor and Town Council
would make the final decision on a loan, said town attorney Dave Gaskill, and
could make that a condition of approval.

“What’re we doing for
the ratepayers? The people struggling to pay their electric bills, struggling
to pay the mortgage?” Hall asked.

The businesspeople of
town fit that bill, said Councilman Dean Burrell. “They are the ratepayers and
taxpayers of our community,” said Burrell.

Anything the town can do
to retain businesses and jobs, the town should do, he said.

“What we need to work on
in town for the businesses is the commercial electric rate,” Hall said.

“I can’t in good
conscience support this,” said Councilwoman Paula Lynch.

“I’m in the same
position. I just don’t want to make this a loan office and that’s where we’re
going here,” said Councilman Troy Purnell.

The commercial electric
rates are hurting town businesses more than anything else, Purnell said.

Comprehensive changes to
the commercial electric rates are in the works, Williams said.

Williams asked the town
council to keep the risk in perspective, saying that defaults are possible but
not likely to be a high amount.

The rest of the reserve
fund is sitting there earning hardly enough to cover administrative costs,
Williams said.

A revolving loan fund
would be a matter of acting on the town’s philosophy of supporting and
improving local businesses, Williams said.

“I know how hard it is
to be in business … I just feel like anything we can do to help the businesses
in Berlin we should do it,” said Councilman Elroy Brittingham.

Brittingham and Burrell
voted for the revolving loan fund, while Hall, Lynch and Purnell voted against.

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